Bobby Patton is the embodiment of the idea that increasing exports can help grow jobs. His Gaithersburg telecom company, Patton Electronics, first began selling routers and other devices to overseas customers during the 1990s. As exports began to comprise a greater percentage of his revenue, his bank began to take notice.
“Our local bank didn’t want to lend against those international receivables the way they lend against domestic receivables,” he said.
So in 2000, Patton received a guarantee from the Export-Import Bank, a government agency that both ensures lines of credit to foreign buyers and helps them finance the purchase of American goods. With the Ex-Im guarantee, Patton’s local bank was willing to loan up to 90 percent of Patton’s overseas receivables as working capital, and his business began growing 20 percent each year.
Now Patton is concerned his growth may be slowing unless Congress votes to renew the Ex-Im’s exposure limit. The agency is currently operating on a temporary extension of its charter and is projected to hit its $100 billion limit sometime this month, meaning it would not be able to provide financing for new loans. Senate Democrats proposed last week to increase the exposure limit to $140 billion over the next three years, but the measure faces opposition from some House Republicans and from various free-market advocacy groups.
“If there is no reauthorization, our bank in the next year is not going to be willing to loan against the overseas receivables the way they have been,” Patton said. “That puts us in a precarious position, including possibly cutting employment.”
As part of an overall plan of doubling exports by 2015, the Obama administration called on Congress to renew the bank’s charter and increase its lending cap. The reauthorization stalled over the past few months because of disagreements between the House and Senate about the size of the lending cap and about how to handle pressure from outside groups.
The controversy is unusual because it pits typically pro-business groups such as the Club for Growth and the Heritage Foundation, who oppose the bank, against commercial groups such as the National Association of Manufacturers and the U.S. Chamber of Commerce, who support it. Some free market organizations argue that the bank’s backing of business loans amounts to favoritism and an unconstitutional overreach of government into the private sector.
“The bank helps some businesses but hurts others,” said Andy Roth, vice president of government affairs for the Club for Growth.
But supporters say the bank’s services are now more necessary than ever because recent financial crises have made banks more cautious about guaranteeing overseas buyers.
“The emerging markets are growing rapidly, so there is great opportunity for exports,” said John Hardy, president of the advocacy group Coalition for Employment Through Exports.
Meanwhile, Patton said, his local bank has already put the brakes on his plan to expand to a new manufacturing facility.
“We have a contract to acquire a new building and move into a new manufacturing facility, and the bank is saying they don’t want to add more debt if Ex-Im is going to be changing what they’re doing on international borrowing,” he said. “They don’t want to add more risk.”